Re:Peter Thiel turned a Roth IRA into a $5B tax-free piggy bank
by jrochkind1 on Thursday June 24, 2021 @10:09PM
(#27626423)
I think you missed a key part. The way Thiel (and others) got so much in the Roth IRA -- when contributions are limited, at that time to 2K/year -- is by under-valuing the non-publicly-traded stock they had insider access to.
Although yes, the main thrust of the reporting is that the tax laws are set up to hugely benefit the rich and allow them to avoid paying taxes, not that the rich are breaking the laws. With these IRAs in particular though, there does seem to be something very dodgy and possibly illegal about the way the rich are getting around the contribution limits by under-valuing non-publicly-traded stocks.
> Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth.
> PayPal later disclosed details about the early history of the company in an SEC filing before its initial public offering. The filing reveals that Thiel’s founders’ shares were among those the company sold to employees at “below fair value.”
> Victor Fleischer, a tax law professor at the University of California, Irvine who has written about the valuation of founders’ shares, read the PayPal filings at ProPublica’s request. Buying startup shares at a discounted $0.001 price with a Roth, he asserts, would be indefensible.
> “That’s a huge scandal,” Fleischer said, adding, “How greedy can you get?”
> Warren Baker, a Seattle tax attorney who specializes in IRAs, said he would advise clients who are top executives working at a startup not to purchase founders’ shares with a Roth to avoid accusations by the IRS that they got a special deal and undervalued the shares. Baker was speaking generally, not about Thiel.
> “I would be concerned about the fact that you can’t support the valuation number as being reasonable,” he said.
Although yes, the main thrust of the reporting is that the tax laws are set up to hugely benefit the rich and allow them to avoid paying taxes, not that the rich are breaking the laws. With these IRAs in particular though, there does seem to be something very dodgy and possibly illegal about the way the rich are getting around the contribution limits by under-valuing non-publicly-traded stocks.
> Thiel’s unusual stock purchase risked running afoul of rules designed to prevent IRAs from becoming illegal tax shelters. Investors aren’t allowed to buy assets for less than their true value through an IRA. The practice is sometimes known as “stuffing” because it gets around the strict limits imposed by Congress on how much money can be put in a Roth.
> PayPal later disclosed details about the early history of the company in an SEC filing before its initial public offering. The filing reveals that Thiel’s founders’ shares were among those the company sold to employees at “below fair value.”
> Victor Fleischer, a tax law professor at the University of California, Irvine who has written about the valuation of founders’ shares, read the PayPal filings at ProPublica’s request. Buying startup shares at a discounted $0.001 price with a Roth, he asserts, would be indefensible.
> “That’s a huge scandal,” Fleischer said, adding, “How greedy can you get?”
> Warren Baker, a Seattle tax attorney who specializes in IRAs, said he would advise clients who are top executives working at a startup not to purchase founders’ shares with a Roth to avoid accusations by the IRS that they got a special deal and undervalued the shares. Baker was speaking generally, not about Thiel.
> “I would be concerned about the fact that you can’t support the valuation number as being reasonable,” he said.